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Analyzing Contribution Margins and Production Strategies for California Instrument Company

In this session, we will review assigned problems related to the California Instrument Company, focusing on its Semiconductor and Process Control divisions. Participants will calculate the contribution margin per hour for producing OK-Chips and Super-Chips. We'll address questions on production volumes and transfer pricing, exploring optimal production strategies without transfers to the Process-Control Division. This interactive quiz will assess understanding and application of cost information and contribution margin calculations.

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Analyzing Contribution Margins and Production Strategies for California Instrument Company

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Presentation Transcript

  1. Agenda Today – Session 9 • Go over assigned problems • Answer questions • Take quiz A&MIS 525

  2. Problem Background • California Instrument Company consists of two divisions: • Semiconductor division • Super-chip • Okay-chip • Process-control division • Process-control unit A&MIS 525

  3. Cost Information A&MIS 525

  4. Requirement 1 • Calculate the contribution margin per hour from producing and selling each OK-Chip and each Super-Chip. If no transfers are to be made to the Process-Control Division, how many OK-Chips and Super-Chips should the Semiconductor Division produce and sell? A&MIS 525

  5. Requirement 1, Part A A&MIS 525

  6. Requirement 1, Part B A&MIS 525

  7. Requirement 2 • The Process-Control Division expects to sell 5,000 unit this year. From the viewpoint of California Instruments as a whole, should 5,000 Super-Chips be transferred to the Process-Control Division instead of purchasing circuit boards? A&MIS 525

  8. Requirement 2 – Cost A&MIS 525

  9. Requirement 2 – CM A&MIS 525

  10. A&MIS 525

  11. A&MIS 525

  12. Requirement 3 A&MIS 525

  13. Requirement 4 A&MIS 525

  14. Requirement 4 A&MIS 525

  15. Requirement 4 • Transfer price: • $46 to $50 on 10,000 Super-chips or less • $60 for each additional Super-chip A&MIS 525

  16. Any Questions? A&MIS 525

  17. Session 3 William F. Bentz January 22 , 2002 Fisher College of Business A&MIS 525

  18. A&MIS 525

  19. A&MIS 525

  20. Problem Requirements A&MIS 525

  21. Product Cost Characteristics A&MIS 525

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